By George Putnam, The Turnaround Letter

Our top conservative pick for 2013 is Cisco Systems (CSCO), a world leader in networking and other data transmission products.

Cisco is the dominant supplier in many of its markets, and its products provide the backbone for several of the fastest growing technology sectors, including cloud computing, video, smart phones, and social networking. 

In addition to its hardware businesses, Cisco is seeing steady growth in its service offerings, which generally have higher margins.

In its quest for improved profitability, the company is cutting costs as well as growing revenues. It has reduced worldwide headcount by more than 5,000 over the past year, and streamlined its operating structure. 

The company's balance sheet is impeccable; cash flows are strong and growing; and management is committed to returning 50% of free cash flow to shareholders through dividends and share repurchases. 

Cisco has been like the sleeping giant of the technology industry since the internet bubble burst in 2000. We now believe that the giant is awakening, and it will give shareholders a good ride in 2013 and beyond. 

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